The Governor of the Central Bank of Libya, Naji Issa, issued an official statement today, revealing a series of critical economic and financial challenges facing Libya, which have worsened due to an unprecedented surge in public spending and the persistent state of sharp political division plaguing the country.
In its statement, the Central Bank affirmed its unwavering commitment to Law No. (1) of 2005 and its subsequent amendments, and its relentless pursuit of financial and monetary stability in the nation. However, the prevailing circumstances and challenges confronting the national economy have compelled the Bank to disclose a set of alarming facts that are directly impacting the performance of the entire national economy.
The statement outlined key points, commencing with the issue of dual public spending, which reached a total of 224 billion Libyan Dinars in 2024, distributed as 123 billion Dinars for the Government of National Unity, 42 billion Dinars for oil swaps, and 59 billion Dinars for the other Libyan government. In contrast, total oil and tax revenues amounted to only 136 billion Libyan Dinars. This substantial disparity between expenditure and revenue led to a high demand for foreign currency, estimated at approximately 36 billion US dollars, which in turn exerted immense pressure on the exchange rate of the Libyan Dinar against other foreign currencies.
According to the statement, this significant expansion in public spending resulted in an increase in the money supply to around 178.1 billion Libyan Dinars, a situation that portends a notable rise in inflation rates, a growing weakness in the purchasing power of the local currency, and serious risks threatening the overall economic stability of the country.
The statement further clarified a significant decline in oil revenues and a marked decrease in oil revenues remitted to the Central Bank during 2024, reaching about 18.6 billion US dollars, compared to total foreign currency expenditures of approximately 27 billion US dollars during the same period. This resulted in a substantial funding gap that consequently hindered the Bank’s ability to implement a stable and effective exchange rate policy.
The Central Bank anticipates the continuation of dual spending patterns and similar spending decisions throughout 2025, based on the “12/1” rule in the persistent absence of a unified state budget, and with spending levels remaining consistent with those of 2024. This implies a sustained increase in pressure on foreign currency reserves and a further rise in the deficit in both the balance of payments and the national public debt.
The Bank also noted in its statement that total foreign currency expenditures during the first quarter of the current year amounted to approximately 9.8 billion US dollars, while oil revenues during the same period did not exceed 5.2 billion US dollars, resulting in a significant deficit of around 4.6 billion US dollars in just three months.
The total public debt owed to the banks operating in both Tripoli and Benghazi has reached approximately 270 billion Libyan Dinars, and the Bank projects that this figure will surpass 330 billion Libyan Dinars by the end of 2025, a figure described by the Bank as “completely unsustainable.” The Central Bank explained in its statement that it has been compelled to utilize a portion of the country’s foreign currency reserves, which exceed a total value of 94 billion US dollars, to maintain price stability in the local market. However, it simultaneously warned that this measure is considered temporary and not sustainable in the long term.
The Bank further clarified that the ongoing government division crisis and the significant differences in decisions and procedures adopted by the two rival governments have led to the absence of a unified and clear economic vision for the country, which has severely constrained the Central Bank’s ability to implement an effective monetary policy.
This crisis has been further exacerbated by the active phenomenon of smuggling, irregular migration flows, and the consumption of approximately 7 billion US dollars annually by the informal expatriate workforce, which has increased pressure on foreign currency resources and significantly contributed to the expansion of the black market for buying and selling foreign currencies and illegal money laundering operations. In its significant concluding remarks, the Central Bank announced its intention to take a series of firm and urgent measures, including a reconsideration of the Libyan Dinar’s exchange rate against other foreign currencies and the implementation of stricter controls on foreign currency transactions, to achieve a degree of balance in the current absence of effective and comprehensive macroeconomic policies.
The Bank also expressed its full readiness to cooperate fully with all relevant authorities in the country and called upon the legislative and executive branches to unify efforts and work jointly towards ending the current state of political division, adopting a unified state budget as quickly as possible, effectively controlling and rationalizing public spending, and enhancing economic and monetary stability in the country.
Finally, the Bank also called upon the judicial and security authorities in the country to intensify their efforts aimed at combating smuggling activities and illegal trading of foreign currencies, given the direct threat and real danger these activities pose to the national economy and the future of the country.
